S.African govt bonds weaken sharply as market sees higher U.S. rates

rands1South African government bonds weakened sharply early on Wednesday and yields jumped to their highest in six weeks, tracking a slide in U.S. Treasuries in anticipation of imminent policy tightening by the Federal Reserve.

The local currency was steady, with traders expecting it to take some direction from local inflation data at 0800 GMT and retail sales numbers at 1100 GMT, ahead of the release of the minutes of the last Fed policy meeting later in the day.

The yield on the 2026 bond climbed as much as 12 basis points to 7.735 percent, a level it last reached on Jan. 7, according to Thomson Reuters data.

“There’s a whole bunch of risk-off trades,” said Citi trader Mark Southworth. “U.S. Treasuries got hit hard last night and Asian rates and South African rates are following.”

By 0643 GMT the rand was trading at 11.6820 versus the dollar, barely changed from Tuesday’s close at 11.6740.

It was equally flat against the euro at 13.3100.

“The rand has traded sideways so far this week but faces increased event risk today,” Rand Merchant Bank currency analyst John Cairns said in a morning note.

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